SURIA (6521) - Suria Capital Holdings Berhad - Budget 2017 Fireworks

SURIA (6521) - Suria Capital Holdings Berhad - Budget 2017 Fireworks 

Suria Capital Holdings Berhad (Suria - 6521) is a Sabah based company that had multiple business from port operation, logistic and bunkering service, civil infrastructure contract and engineering service, ferry terminal operation, property development and investment. However, Suria core business will be port operation, as Suria is in charge of 8 ports in Sabah, namely, Sapangar Bay Container Port, Sapangar Bay Oil Terminal, Kota Kinabalu Port, Kudat Port, Sandakan Port, Tawau Port, Lahad Datu Port and Kunak Port.

With the challenging business environment in the global front, volatile currency, business had been hard for logistic company such as South Korean Hanjin Shipping that had succumbed to the ill market. As for the case of Suria, in order to remain it's competitiveness in the port operation in the region, the choice will be in the upgrading of infrastructure and facilities in the region.


A prime beneficiaries for coming Budget 2017

On of the most appealing factor to take note on Suria is due to the coming Budget 2017 announcement which will indefinitely benefit the group in an overall manner. For the past couple of budget, it is noted that there isn't much major infrastructure announcement in Sabah, unlike the infrastructure development in Peninsula Malaysia such as the KVMRT, LRT, numerous highway, as well as the Pan Borneo Highway for the Sarawak section.

For the coming Budget 2017, Sabah is finally looking to see major infrastructure upgrade that will connect all port in Sabah through railway line. Sabah Ports Sdn Bhd that operates 8 ports in Sabah is the wholly owned subsidiary for Suria. It is a plan for Suria to turn ports into a one-stop for BIMP-EAGA region. (Brunei, Indonesia, Malaysia, Philippines, East Asean Growth Area). According to familiar sources related in the development of this area, it is been informed that the planning is already at it's very advance stage now, and it's only waiting for the Federal Government to include this mega infrastructure project into the upcoming Budget 2017. The whole development could be looking to see no less than RM 5 billion in an overall manner. However, the project will be looking to be separated into a few packages.


Suria a potential Project Delivery Partner

Beside then port operation, Suria have a division for engineering and construction. While this division had not generate much revenue as of lately, we see that Suria will be one of the Project Delivery Partner in this railway construction that will connect all 8 ports together.

Back then in Year 2008, Suria has won a RM 8.5 million job from KTM to build additional signalized railway crossing on the rehabilitation of the Sabah Railway project from Tanjung Aru to Tenom.

Another potential candidate that will probably be teaming up in Suria will most probably be Gabungan AQRS Berhad (Gbgaqrs - 5226) based on the their track record in KVMRT 1. To recap, GbgAqrs alongside with SBCCorp had entered into a joint venture agreement with Suria to development a total of 23.25 acres in One Jesselton Waterfront project, in which the project had recently obtain the sub division of the master land title. GgbAqrs is joint venture portion is 7 acre, which carries a total GDV of RM 1.8 billion. It is also worth to take note that the major shareholder of GbgAqrs, which is Ganjaran Gembira Sdn Bhd had been actively mopping up share in the open market for the past 5 months.

Fundamental Outlook

The lower revenue on this quarter when compared to the previous year corresponding quarter is due to a 1 off recognition of revenue from property development. The 2nd quarter revenue is reflecting revenue mostly from port operation. However, with the breaking ground of development and construction on One Jesselton Project, the whole project is expected to contributed to Suria earning for the next coming 8 years.

Aside from this, the railway construction will also contribute to Suria earning significantly should Suria emerge as one of the Project Delivery Partner.

With a healthy cash position, Suria current market price of RM 2.10 is only reflecting 61% of it's total NTA of RM 3.43 per share, making Suria an interesting look out given it's coming prospect and growth in revenue in the coming quarters.

Technical Outlook

On a long term outlook, Suria is likely to be seen as trading in a gradual long term downtrend. However, Suria is looking to put a good challenge upwards given the coming positive outlook on the company. With the supported development, it is very likely that Suria can make it's way up to the upper band of the trend.

However, on the near term outlook, it is noted that Suria had consolidated well at the price range of RM 2.00 before the stock started to move recently. The move which would coincide with the coming Budget 2017 announcement, putting Suria as one of the potential beneficiaries.


Given that Sabah had not received any huge budget for infrastructure project for the past few budget announcement, this would probably be the last budget that is to be announced by the BN lead government before Malaysia enter into general election next year. Suria is foreseeable to see strong growth for the next couple of years from property development and construction in One Jesselton Project as well as the potential candidate as PDP for the railway construction to link all 8 ports in Sabah under the Sabah Port Authority. With the better facilities and infrastructure at place, it will also reinvent the image of Sabah port in the regional area, boosting volume.

Still guessing on who will benefit on Budget 2017 ? Look no further than Suria, choice will be at your hand now.

Bone's TP : RM 2.50

SURIA (6521) - Suria Capital Holdings Berhad - Budget 2017 Fireworks 
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